The accompanying unaudited condensed financial statements of CreditRiskMonitor.com, Inc. (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosure required by generally accepted accounting principles (“GAAP”) in the United States for complete financial statements have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). In the opinion of management, the accompanying unaudited condensed financial statements reflect all material adjustments, including normal recurring accruals, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods presented, and have been prepared in a manner consistent with the audited financial statements for the fiscal year ended December 31, 2018.2019.

The results of operations for the three and nine months ended September 30,March 31, 2020 and 2019 are not necessarily indicative of the results for an entire fiscal year.

The December 31, 20182019 balance sheet has been derived from the audited financial statements at that date, but does not include all disclosures required by GAAP. These financial statements should be read in conjunction with the audited financial statements and the footnotes for the fiscal year ended December 31, 20182019 included in the Company’s Annual Report on Form 10-K.

The Financial Accounting Standards Board and the SEC have issued certain other accounting pronouncements as of September 30, 2019 that will become effective in subsequent periods; however, management does not believe that any of those pronouncements would have significantly affected the Company’s financial accounting measurements or disclosures had they been in effect during the interim periods for which financial statements are included in this quarterly report. Management also believes those pronouncements will not have a significant effect on the Company’s future financial position or results of operations.

(4)(3) Revenue Recognition

The Company applies ASC 718, Compensation-Stock Compensation (“ASC 718”) to account for stock-based compensation.

(6)(5) Fair Value Measurements

The Company records its financial instruments at fair value in accordance with accounting guidance. The determination of fair value assumes that the transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The fair value hierarchy is broken down into three levels based on the source of inputs as follows: (a) Level 1 – valuations based on unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; (b) Level 2 – valuations based on quoted prices in markets that are not active, or financial instruments for which all significant inputs are observable, either directly or indirectly; and (c) Level 3 – valuations based on prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable, thus, reflecting assumptions about the market participants.

The Company’s cash and cash equivalents are stated at fair value. The carrying value of accounts receivable, other current assets, accounts payable and other current liabilities approximates fair market value because of the short maturity of these financial instruments.

The Company’s cash equivalents are generally classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices.

The table below sets forth the Company’s cash and cash equivalents as of September 30, 2019March 31, 2020 and December 31, 2018,2019, respectively, which are measured at fair value on a recurring basis by level within the fair value hierarchy.

The Company did not hold financial assets and liabilities which were recorded at fair value in the Level 2 or 3 categories as of either September 30, 2019March 31, 2020 or December 31, 2018.2019.

During the three and nine months ended September 30, 2018,March 31, 2020 and 2019 the Company recorded a net loss. Basic net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Because the Company has reported a net loss for theseall periods presented, diluted net loss per share is the same as basic net loss per share, as the effect of utilizing the fully diluted share count would have reduced the net loss per share. Therefore, all outstanding stock options were excluded from the computation of diluted net loss per share because their effect was anti-dilutive for each of these periods.the periods presented.

On October 24, 2019, the Company’s Board of Directors appointed Michael Flum to serve as Senior Vice President and Chief Operating Officer effective immediately. Mr. Flum had served as Vice President of Operations & Alternative Data since August 3, 2018. He joined the Company on a part-time basis on June 4, 2018 and became a full-time employee on June 2, 2019.2018. Mr. Flum is the son of Jerome Flum, the Company’s Chief Executive Officer and Chairman of the Board of Directors, and the brother of Joshua Flum, a director of the Company.

On October 24,March 11, 2020, the World Health Organization declared the outbreak of Coronavirus Disease 2019 (“COVID-19” or “virus”) as a global pandemic. The full impact of COVID-19 is unknown and rapidly evolving. The outbreak and any preventative or protective actions that the Company or its customers may take in respect of this virus may result in a period of disruption, including the Company’s Boardfinancial reporting capabilities, its operations generally and could potentially impact the Company’s customers, data providers and other third parties. Any resulting financial impact cannot be reasonably estimated at this time, but may materially affect the business and the Company’s financial condition and results of Directors declaredoperations. The extent to which the COVID-19 impacts the Company’s results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain the virus or treat its impact, among others. The Company has been operating remotely without any disruption of operations. To date, the Company’s data providers have provided an uninterrupted stream of information thus enabling the Company to deliver its product. The Company is currently evaluating the impact, if any, on its financial statements and has not yet quantified what material impacts to the financial statements may result from the actions taken by the Company and its customers in respect of this virus.

In response to COVID-19, President Donald Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) on March 27, 2020. The CARES Act provides numerous tax provisions and other stimulus measures, including temporary changes regarding the prior and future utilization of net operating losses, temporary changes to the prior and future limitations on interest deductions, temporary suspension of certain payment requirements for the employer portion of Social Security taxes, technical corrections from prior tax legislation for tax depreciation of certain qualified improvement property, and the creation of certain refundable employee retention credits. Additionally, the CARES Act contains relief for small businesses through several new temporary programs, one of which is the Paycheck Protection Program (“PPP”). The PPP is a dividend of $0.05 per outstanding share of its common stock, payableloan designed to provide a direct incentive for small businesses to keep their workers on December 2, 2019 to stockholders of recordthe payroll. The Small Business Administration (“SBA”) will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent or utilities. The Company applied for a loan under this program and has received $1.56 million. In accordance with the requirements of the CARES Act, the Company intends to use the proceeds from the PPP Loan primarily for payroll costs. The PPP loan is scheduled to mature on April 15, 2022, has a 1.00% interest rate, may be prepaid at any time without penalty and is subject to the closeterms and conditions applicable to all loans made pursuant to the PPP as administered by the SBA under the CARES Act. The loan and accrued interest is forgivable after eight weeks so long as the Company uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels.  The amount of business on November 14, 2019.loan forgiveness will be reduced if the Company terminates employees or reduces salaries during the eight-week period.

Under normal circumstances, the Company believes that its existing balances of cash and cash equivalents and cash generated from operations willwould be sufficient to satisfy its currently anticipated cash requirements through at least the next 12 months and the foreseeable future. Moreover, theThe Company has been cash flow positive for 7 of the last 10 fiscal years and has no long-term debt. However, the Company’s liquidity could be negatively affected if it were to make an acquisition or license products or technologies, which may necessitate the need to raise additional capital through future debt or equity financing. Additional financing may notMoreover, given the current COVID-19 pandemic there is no guarantee that our current business levels can be available at allsustained or on terms favorablethat our subscriber base will be able to meet their financial commitments to the Company. In order to ensure we have the financial resources to meet our commitments to our employees and service providers in the upcoming months, and to avoid lay-offs or other cost cutting measures, the Company applied for and received a loan under the Paycheck Protection Program.  See Note 8 to our Financial Statements in Item 1 above.

Operating revenues increased $191,882,$212,942, or 6%, for the three months ended September 30, 2019March 31, 2020 compared to the thirdfirst quarter of fiscal 2018.2019. This overall revenue growth resulted from an increase in Internet subscription service revenue, attributable to increased sales to new and existing subscribers.

Data and product costs increased $4,507,$57,335, or 0.3%4%, for the thirdfirst quarter of 20192020 compared to the same period of fiscal 2018.2019. This increase was due primarily to: (1) higher salary and related employee benefits due to pay raises to staff, and (2) higher costs of third-party content, due to minor inflationary increases instituted by some of the Company’s major suppliers,suppliers. These higher expenditures were offset in part by: (1) lower consulting fees, as no consultants were engaged in the first quarter of 2020, (2) lower training fees, as no training was done in the first quarter of 2020, and (2) increases in salaries and related employee benefits. These increases were partially offset by(3) lower costs associated with the outsourcing of certain data entry tasks, as the Company authorized overtime to catch up on some processing backlogs in 2018 which were not incurred in 2019.tasks.

Selling, general and administrative expenses decreased $98,172,increased $247,847, or 5%11%, for the thirdfirst quarter of fiscal 20192020 compared to the same period of fiscal 2018.2019. This decreaseincrease was due to:to higher salary and related employee benefits, because of a higher commission expense and a headcount increment. This increase was offset in part by: (1) lower professional fees, as the Company hired in-house counsel as of the beginning of the third quarter of 2019, and (2) lower marketing expenses related to the timing of trade show attendance. This decrease was offset in part by: (1) higher rent and related expenses resulting from the Company’s expansion of its office in mid-2018, and (2) increases in salaries and related employee benefits.expenditures.

Depreciation and amortization increased $3,084,$3,123, or 6%, for the thirdfirst quarter of fiscal 20192020 compared to the same period of fiscal 2018.2019. This increase was due to the leasehold improvements incurredcapitalization of a new accounting system installed in connection with2019 that the Company’s expansion of its officeCompany started depreciating in mid-2018.last year’s fourth quarter.

Other income, net increased $3,513decreased $18,206 for the thirdfirst quarter of fiscal 20192020 compared to the same period last year. This increasedecrease was due to greater dividend incomethe lower return received in the third quarter of fiscal 2019 on all of the Company’s money market fund holdings.holdings compared to the first quarter of fiscal 2019.

ProvisionBenefit for income taxes increased $71,240$51,689 for the thirdfirst quarter of fiscal 20192020 compared to the same period of fiscal 2018.2019. This increase was due to the Company reporting a pre-tax income in 2019 versus ahigher pre-tax loss in 2018,2020 versus 2019, because of the reasons enumerated above, partially offset by a lower effective tax rate in 2019.above.

The Company over time intends to expand its operations by expanding the breadth and depth of its product and service offerings and introducing new and complementary products. Gross margins attributable to new business areas may be lower than those associated with the Company’s existing business activities.

Achieving greater profitability depends on the Company’s ability to generate and sustain increased revenue levels. The Company believes that its success will depend in large part on its ability to (i) increase its brand awareness, (ii) provide its customers with outstanding value, thus encouraging customer renewals, and (iii) achieve sufficient sales volume to realize economies of scale. Accordingly, the Company intends to continue to increase the size of its sales force and service staff, and to invest in product development, operating infrastructure, marketing and promotion. The Company believes that these expenditures will help it to sustain the revenue growth it has experienced over the last several years. We anticipate that sales and marketing expenses will continue to increase in dollar amount and as a percentage of revenues during the remainder of 20192020 and future periods as the Company continues to expand its business on a worldwide basis. Further, the Company expects that product development expenses will also continue to increase in dollar amount and may increase as a percentage of revenues during the remainder of 20192020 and future periods because it expects to employ more development personnel on average compared to prior periods and build the infrastructure required to support the development of new and improved products and services. However, as these expenditures are discretionary in nature, the Company expects that the actual amounts incurred will be in line with its projections of future cash flows in order not to negatively impact its future liquidity and capital needs. There can be no assurance that the Company will be able to achieve these objectives within a meaningful time frame.

The Company expects to experience fluctuations in its future quarterly operating results due to a variety of factors, some of which are outside the Company’s control. Factors that may adversely affect the Company’s quarterly operating results include, among others, (i) the short-term and long-term effects the COVID-19 outbreak and related developments will have on our customers and their ongoing businesses and how those effects may impact our sales to them, (ii) the Company’s ability to retain existing customers, attract new customers at a steady rate and maintain customer satisfaction, (ii)(iii) the Company’s ability to maintain gross margins in its existing business and in future product lines and markets, (iii)(iv) the development of new services and products by the Company and its competitors, (iv)(v) price competition, (v)(vi) the Company’s ability to obtain products and services from its vendors, including information suppliers, on commercially reasonable terms, (vi)(vii) the Company’s ability to upgrade and develop its systems and infrastructure, and adapt to technological change, (vii)(viii) the Company’s ability to attract and retain personnel in a timely and effective manner, (viii)(ix) the Company’s ability to manage effectively its development of new business segments and markets, (ix)(x) the Company’s ability to successfully manage the integration of operations and technology of acquisitions or other business combinations, (x)(xi) technical difficulties, system downtime or Internet brownouts, (xi)(xii) the amount and timing of operating costs and capital expenditures relating the Company’s business, operations and infrastructure, (xii)(xiii) governmental regulation and taxation policies, (xiii)(xiv) disruptions in service by common carriers due to strikes or otherwise, (xiv)(xv) risks of fire or other casualty, (xv)(xvi) litigation costs or other unanticipated expenses, (xvi)(xvii) interest rate risks and inflationary pressures, and (xvii)(xviii) general economic conditions and economic conditions specific to the Internet and online commerce.

Due to the foregoing factors, the Company believes that period-to-period comparisons of its revenues and operating results are not necessarily meaningful and should not be relied on as an indication of future performance.

This Quarterly Report on Form 10-Q may contain forward-looking statements, including statements regarding future prospects, industry trends, competitive conditions and litigation issues. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes”, “expects”, “anticipates”, “plans” or words of similar meaning are intended to identify forward-looking statements. This notice is intended to take advantage of the “safe harbor” provided by the Private Securities Litigation Reform Act of 1995 with respect to such forward-looking statements. These forward-looking statements involve a number of risks and uncertainties. Among others, factors that could cause actual results to differ materially from the Company’s beliefs or expectations are those listed under “Business Environment” and “Results of Operations” and other factors referenced herein or from time to time as “risk factors” or otherwise in the Company’s Registration Statements or Securities and Exchange Commission reports. The Company disclaims any intention or obligation to revise any forward-looking statement, whether as a result of new information, a future event or otherwise.

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective.

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.